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Business Services Industry

Capmark Financial Group Inc. Reports 2008 First Quarter Operating Results

Business Wire, May 13, 2008

SAN MATEO, Calif. -- Capmark Financial Group Inc. ("Capmark" or "we") reported a net loss of $212.9 million for the quarter ended March 31, 2008, compared to net income of $175.5 million for the quarter ended March 31, 2007. The current quarter loss was attributable to pre-tax net losses on loans of $357.2 million primarily resulting from fair value adjustments on Capmark's held for sale commercial mortgage loan portfolio.

Company Highlights

* In April 2008, Capmark sold interests in loans in its European portfolio for approximately $1.8 billion in cash and used the majority of the proceeds to repay outstanding debt. In addition to increasing overall liquidity, the transaction resulted in the reduction of:

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* Our retail property loan concentration, as a percentage of total loans, from 19% as of March 31, 2008 to 11% following the sale; and

* Our average loan size from $9.9 million as of March 31, 2008 to $8.7 million following the sale.

* Capmark's servicing portfolio increased to $380.2 billion as of March 31, 2008, compared to $371.7 billion as of December 31, 2007, and $334.2 billion as of March 31, 2007.

* Loan originations were $2.7 billion during the first quarter of 2008, compared to $8.8 billion in the first quarter of 2007 due, in large part, to Capmark's ongoing balance sheet and liquidity management and reduced volume of third-party originations.

* In April 2008, Capmark completed an exchange offer of SEC-registered senior notes for the then-outstanding senior notes issued pursuant to Rule 144A and Regulation S in May 2007. The terms and conditions of the registered notes are substantially the same as the terms of the original notes, except for terms relating to the registration.

Consolidated Financial Review

First quarter 2008 net revenue was $(139.7) million, compared to $521.2 million in the same period in 2007, primarily as a result of a decline in noninterest income from net losses on loans of $357.2 million in the first quarter of 2008 compared to net gains on loans of $77.2 million in the first quarter of 2007. Net gains (losses) on loans are primarily comprised of fair value adjustments on loans held for sale and realized net gains/losses on loans sold.

Net interest income after provision for loan losses was $53.5 million in the first quarter of 2008 as compared to $77.2 million in the same period in 2007. The decline was primarily due to lower average spreads on interest-earning assets and a reduction of accretion income on acquired non-performing loans year over year. The decline in spread income was largely offset by gains on interest rate hedges included in noninterest income in the first quarter of 2008.

Noninterest income was $(193.2) million for the first quarter of 2008 compared to $444.0 million in the first quarter of 2007. The decline was primarily a result of the $357.2 million net loss on loans in the first quarter of 2008 and a decline in fee and investment income from $264.7 million in the first quarter of 2007 to $156.5 million in the first quarter of 2008. The decline in fee and investment income was primarily attributable to reduced earnings from joint ventures and partnership investments and a decline in asset management fees due to higher performance-based fees earned during the first quarter of 2007.

First quarter 2008 noninterest expenses were $208.6 million compared to $235.8 million in 2007, an 11.5% decline. The decline was primarily due to lower fixed and variable compensation expense.

Outlook on Liquidity

As of March 31, 2008, cash, restricted cash and cash equivalents totaled $1.1 billion. Readily available cash and borrowing capacity under our revolving credit facility totaled $0.9 billion (excluding cash held by Capmark Bank).

During April 2008, Capmark sold interests in loans in its European portfolio with an aggregate unpaid principal balance of approximately $2.0 billion to an institutional investor in two transactions. The total cash proceeds of approximately $1.8 billion from the sale were primarily used to repay outstanding debt. As a result of the European loan sale, as well as additional sales of other loans, readily available cash and borrowing capacity under our revolving credit facility was $2.3 billion as of April 30, 2008 (excluding cash held by Capmark Bank).

The ratio of adjusteddebt to adjusted equitywas 6.7x as of March 31, 2008, compared to 5.9x as of December 31, 2007. As of March 31, 2008, our pro-forma adjusted debt to adjusted equity ratio was 6.2x after giving effect to the closing of the European loan sale and the application of a majority of the net proceeds to the repayment of indebtedness.(*)

(*) See our discussion of Non-GAAP financial measures below.

Capmark has continued to take actions to maintain sufficient liquidity to support its business operations in the current difficult credit environment. These actions included the following:

* We managed the volume and mix of loan originations among product types to emphasize products with better liquidity and lower funding costs, including government-sponsored programs, third-party originations and loans funded by Capmark Bank. During the first quarter of 2008, our total loan originations of $2.7 billion primarily included $1.3 billion of government-sponsored program originations, $646.2 million of third-party originations, and $616.6 million of Capmark Bank originations.

Business Services Industry

Capmark Financial Group Inc. Reports 2008 First Quarter Operating Results

Business Wire, May 13, 2008

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